The first step to more Money is to learn this financial freedom formula and engrave it into your memory.
FF: PI > E
- FF is Financial Freedom
- PI is Passive Income
- E is Expenses
So, elaborating it… Financial Freedom (FF) is Passive Income (PI) more than Expenses (E).
Most people have a job because it provides the money to pay for living expenses. (Does that explain why most people HATE their job?). When you are financially free, it means that you can enjoy the lifestyle that you want without worrying about income or expenses.
Is it possible? Before I know the equation (FF: PI > E), I do not believe that it is in my destiny to achieve this. And after reading through Robert Kiyosaki’s The Cashflow Quadrant, I realized that I can do it too! And it is interesting how … when your belief changes, reality starts to create itself! In fact, I don’t need $1,000,000 to be financially free. I only need my Expenses number and earn the Passive Income amount above it.
What is Passive Income?
Passive Income is an income received on a regular basis, with little effort required to maintain. Some examples are
- Earnings from a systemised business
- Rent from property
- Royalties from publishing a book or song or licensing a patent
- Earnings from internet advertisements
- Earnings from Franchise your business model to other people
- Dividends from stocks
- Earnings from Systemised Network Marketing business
Expenses are items such as food, utilities, mobile phone subscriptions, transport, home insurance, home mortgage, car petrol, pets, internet, medical expenses, taxes, charity, vacations, allowance, gifts, newspaper, clothes, parties, car repair, life insurance, home helper and many more.
So, you achieve success using Financial Freedom Formula when your Passive Income exceeds your Expenses.
Although the equation is simple, it is not easy to achieve it. Why? This is because most people are not used to earning Passive Income. In fact, most of us have been programmed to “work hard for the money”. I still remember the first time that I earned Passive Income. I actually felt guilty. It took me a while to get used to earning Passive Income. So, can you understand why most people find it hard to achieve Financial Freedom?
Accelerating Your Path towards Success using Financial Freedom Formula
Now, to accelerate your path towards Financial Freedom, we have to tweak the equation. Want to make a guess on how to do it?
Yes.. simply by increasing your Passive Income and decreasing your Expenses.
We will talk about increasing your Passive Income in subsequent blog post.
For now, what you can immediately do is to simplify your life to reduce your expenses. So, use the Personal Financial Statement I gave you in the ebook and create a draft budget for your life. Then, start tracking your expenses for the next 3 months. Again, if you don’t know your Expenses amount, it is just not possible for you to know that you have reached the status of Financial Freedom.
I would love to hear how you simplify your life or create passive income. Your comment will help fellow Money Champions in their journey too. Comment below please